In today’s modern world, it’s very difficult to live a normal life without borrowing some money. You may borrow money to buy a car, or you may even buy a house. Or perhaps the only time you borrow money is when you use your credit card. One thing that makes it much easier to borrow is having good credit.
If you have really good credit, everybody will want to lend money to you, and you’ll get very low interest rates. If you have poor credit, on the other hand, it can be tough to even qualify for an automobile loan without having a co-signer. That’s why keeping a good credit score is very important.
The first step to maintaining good credit is to always pay your debts on time. Even if you are late by only a couple days, this can significantly damage your score. Your credit goes back many years, so if you ever miss a payment or pay one late, it can haunt you for quite a while.
Another important thing to keep in mind is that you don’t carry around too much debt. Your debt to income ratio is an important factor. When they consider you for a loan, they look at this number. If it’s too high, then they might think it’s too risky to lend you any money, because you may have trouble paying it back.
To figure out what your debt to income ratio is, just take all the money you pay toward debt every month, including credit cards, and then divide by the amount of money you make in a month, before taxes. If the number that you get is lower than .33, then your debt to income ratio is pretty good.
One more thing to keep in mind is your credit card balances. If the balance on your credit cards are over a certain percentage of your total available credit, this will send up red flags. Try and keep this below fifty percent, or even lower if possible. For example, if your limit is a thousand dollars, try and keep your balance below five hundred bucks.
Keeping a good credit score is easy when you follow these simple tips. You’ll have a much easier time borrowing money, and life will be much more enjoyable.
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